“Tra­di­tional” banks may not ex­ist by 2025, says PwC

Financial Mirror (Cyprus) - - FRONT PAGE -

A new re­port from PwC sug­gests that, by as soon as 2025 – 2030, a mar­ket econ­omy could read­ily ex­ist with­out banks of the tra­di­tional kind. The re­port, The Fu­ture Shape of Bank­ing, says that as bar­ri­ers to en­try for non-banks to pro­vide for­merly ‘core’ bank­ing ser­vices continues to de­cline, the busi­ness mod­els of to­day’s banks will be chal­lenged. How­ever, banks re­tain some sub­stan­tial ad­van­tages to help them pre­vent this from hap­pen­ing: al­though tar­nished by the fi­nan­cial cri­sis, banks’ brands and rep­u­ta­tions re­main pow­er­ful, shored up by fa­mil­iar­ity, ex­pe­ri­ence and reg­u­la­tion. Trust and brand mat­ter in fi­nan­cial trans­ac­tions and some of the re­sis­tance to al­ter­na­tive bank­ing providers re­sults from a trust in their se­cu­rity.

“The sta­tus quo is no more but the need for bank­ing ser­vices re­mains. But cor­po­rate his­tory is full of cau­tion­ary tales about in­cum­bency ad­van­tage be­ing lost at the turn of tech­no­log­i­cal cy­cles,” said Ste­lios Con­stanti­nou, Bank­ing In­dus­try Leader at PwC Cyprus. “Banks still have ad­van­tages and al­ter­na­tive providers suf­fer from a lack of trust but to be part of the fu­ture banks need to in­vest heav­ily, re­dis­cover and re­assert their core role in so­ci­ety, and se­cure the on­go­ing sup­port of pol­i­cy­mak­ers,” he added.

“The big­gest dan­ger for banks is if they


of lose sight of cus­tomer trans­ac­tions to other play­ers in the value chain, thereby also los­ing in­sight into cus­tomer be­hav­iours and al­low­ing the power of their brands to di­min­ish.

“New non-bank en­trants and tech­no­log­i­cal ad­vances will chal­lenge banks’ busi­ness mod­els and fun­da­men­tal change is in­evitable. The only ques­tion is how much of banks’ tra­di­tional ter­ri­tory the new en­trants will oc­cupy.” Other key points from the re­port sug­gest that bank­ing ser­vices will move away from phys­i­cal, tan­gi­ble dis­tri­bu­tion into tech­nol­ogy-en­abled chan­nels. Also, as tech­nol­ogy ad­vances, it will be­come eas­ier for cus­tomers to move be­tween banks and other ser­vice providers.

The re­port added that brands could be­come cen­tral to banks’ value – those which build a brand which rep­re­sents trust, in­tegrity, se­cu­rity and qual­ity to cus­tomers will be more likely to solve the ‘trans­ac­tion cost’ of choos­ing how and with whom to bank.

Fi­nally, be­come man­age­ment lim­its and pro­vid­ing do­mes­tic credit prod­ucts, while reg­u­la­tors and reg­u­la­tion also need to adapt their mind­set and ap­proach in or­der to deal with the chang­ing bank­ing land­scape.

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